Home Depot Stock: Earnings Miss
Home Depot (NYSE:HD) reported another quarter of subdued earnings as consumers hesitated on major home improvement projects amid high interest rates and financial uncertainty. For the latest quarter, the retailer posted revenue of $43.18 billion, falling short of the $43.79 billion forecast. Adjusted earnings per share were $4.67, exceeding the estimated $4.52.
Same-store sales fell by 3.3%, which was worse than the anticipated 2.39% decline, marking Home Depot’s seventh consecutive quarter of negative sales growth. U.S. same-store sales decreased by 3.6%. Both foot traffic and the average ticket size dropped by 1.8% and 1.3%, respectively.
Market Reactions and Future Outlook
These results follow a disappointing quarter from Trex (NYSE:TREX), which negatively impacted its stock. UBS analyst Michael Lasser noted that anticipated interest rate cuts could lead consumers to delay purchases further, as observed in the current data. Home Depot CEO Ted Decker acknowledged the strain on consumer demand due to high interest rates and economic uncertainty.
However, interest rate cuts, expected to start in September, could potentially aid in a market turnaround. Joe Feldman of Telsey Advisory Group cautioned that any improvement might not be immediate. Home Depot has updated its fiscal 2024 guidance, now projecting total sales to increase by 2.5% to 3.5% year-over-year, up from a previous estimate of 1%. Comparable sales are expected to decline between 3% and 4%, worse than the 1% drop initially forecasted.
Industry Insights and Strategic Moves
Whirlpool (NYSE:WHR) CEO Marc Bitzer indicated that multiple rate cuts might be necessary to revive the housing market. Meanwhile, Yahoo Finance reported a drop in mortgage rates to their lowest since early February, following the Federal Reserve’s signals for a September rate cut. Rival Lowe’s (NYSE:LOW), with a larger DIY customer base, will report earnings on August 20.
Home Depot’s recent $18.25 billion acquisition of SRS Distribution, completed ahead of schedule on June 18, is seen as a positive move. Bank of America analyst Robert Ohmes highlighted potential opportunities with the Pro Ecosystem, which is expected to expand to 17 markets by the end of 2024. The acquisition is projected to add nearly $6.4 billion in incremental sales in fiscal 2024.
Featured Image: Megapixl
Author Faith Yakubu 
